Export adjustment to currency depreciation in the presence of parallel markets for foreign exchange: The experience of selected sub-Saharan African countries in the 1980s

The primary focus of this study is an empirical investigation of the implications of parallel exchange markets for export adjustment to official currency depreciation. An econometric model incorporating the features of exchange control and credit constraint was estimated using pooled data from 13 Sub-Saharan African countries. A rise in the parallel currency premium was found to adversely affect official exports; and the estimates suggest that official depreciations which are launched in the presence of large exchange-rate misalignment and which succeed in reducing the latter are likely to exert greater favourable effects on export performance than otherwise equivalent depreciations.